Abstract

With the further opening of the Chinese financial market, the influx of foreign capital and foreign banks brings into unprecedented impact to China's banking industry on various aspects such as professionals, business, technology and operation principle. In addition, in a global financial markets, with the diversification of business, market, as well as the diversification of participators, domestic banks are confronted with market risk, operational risk and credit risk becoming more complex. Therefore, the core issues which concerned by financial market regulatory authorities and the market entities, is that whether a bank having a moderate operating efficiency.

Commercial bank, as an important part in China’s financial institutions, the ultimate goal is to maximize profits. In the operating process of commercial banks, allocation of resources should be optimized, to strive hard to take advantage of minimum capital investment to achieve maximum output. In the pursuit of profit maximization process, the efficiency of the banking is a concentrated expression of competitiveness.

Efficiency is one of the important financial institutions operating performance standards. More specifically, the level of efficiency value could reflect the situation of resource utilization by financial institutions and overall operating conditions. Comparing with the velocity issues, the efficiency problem of banking is much more deeply; on long-term, the development ultimately depends on the efficiency of the banking, rather than speed.

Credit risk which faced by banking has been one of the basic risks. From a global perspective, date back to 1988, Basel Committee on Banking Supervision issued a regulation about the capital adequacy framework, which according to the commercial banks’ credit risks to require capital funds; as a result, this framework improved the banking robustness.